The 7 best bad credit loans in 2024 and how you can qualify (2024)

Bad credit loans typically have higher rates and fees than other loans, but it’s possible to qualify by shopping around and comparing offers. Most lenders (even those that work with bad credit borrowers) require credit scores above 560, but adding a creditworthy cosigner or co-borrower to your loan application can help you qualify if your scores are below that threshold.
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Bad credit loans come with fixed interest rates, typically between 7% and 36%. If you qualify, you’re likely to receive a lender’s highest rate, which can make borrowing expensive. (For this reason, you may be especially interested in bad credit loans from federal credit unions, which often have relaxed credit requirements and cap interest rates at 18%.) Still, a bad credit loan can be a good alternative to predatory forms of borrowing, like payday loans.

Why get a bad credit loan?

• Pay for emergency expenses. Whether you need to replace your car’s transmission or hire a plumber to fix a leak, unexpected expenses can pop up. Bad credit personal loans can help you cover the cost and pay it off in installments.
• Consolidate high-interest debt. If you have very high-interest debt, like payday loans or loans with triple-digit interest rates, you may consider consolidating it with a bad credit personal loan. If you qualify for a lower rate than you’re currently paying, you could save money and potentially pay off your debt faster.
• Build credit. Making regular, on-time payments toward a personal loan builds a positive payment history, which can help boost your scores over time. Although the increased debt load and hard credit inquiry can cause your scores to go down temporarily, loan payments will eventually help your scores recover and improve.
• Increase your borrowing power. If your credit scores are low, your credit card will likely have a low monthly spending limit. Personal loans, on the other hand, offer lump sums up to $100,000. Although you’re unlikely to qualify for a large amount with bad credit, personal loans allow you to finance larger purchases than you could with a credit card.

What is a bad credit loan?

Bad credit loans are personal loans specifically designed for borrowers with poor credit. FICO defines a “poor” credit score as one below 580, but most personal loan lenders require scores of at least 600. While you’re unlikely to qualify for a personal loan if your scores are below that minimum, bad credit lenders often allow you to apply with a cosigner or co-borrower. Adding a second person with strong credit to your loan strengthens your application and reduces the risk to the lender.

Personal loans tend to have higher rates and fees than other loans if you have bad credit, but they’re more affordable than predatory forms of lending, like payday loans, which can trap borrowers in a cycle of debt.

What is a bad credit score?

There are several credit-scoring models, but FICO is the most common. According to FICO, bad credit is a score between 300 and 579.

Personal loan interest rates by credit score

Credit scores play an essential role in your ability to qualify for loans. Lenders use your credit scores to measure your creditworthiness and predict how likely you are to repay the loan as agreed. Good credit scores tell a lender you have a history of responsible credit usage.

If you’ve had credit challenges along the way — perhaps some missed payments or a few maxed-out credit cards — your scores will reflect that history. Getting a loan with bad credit is still possible, but you’ll pay higher rates to offset the increased risk of default.

Here’s a look at the interest rates you can expect based on your credit score:

Example: If you borrow $10,000 with a 30% APR and a five-year loan term, your monthly payment will be $324 and you'll pay $9,412 in total interest charges. But if you improve your scores and qualify for the same loan at 20% APR, your total interest charges will be $5,896 (saving you about $3,500) and your monthly payment will be $59 lower.

Can I get a loan with a 500 credit score?

Yes, it’s possible to qualify for a loan with a 500 credit score — but your options will be limited and the loan will come at a steep cost. If your credit scores are low, lenders are likely to view you as a risky borrower and assign a higher APR. When shopping for lenders, pay close attention to the top end of each lender’s APR range — with a 500 credit score, you’re likely to receive the maximum rate, if you qualify.

Some lenders may require you to offer collateral to offset their risk, like a vehicle or savings account. Although applying for a secured loan can improve your eligibility and potentially reduce your interest rate, remember that the lender can seize your collateral if you fall behind on your loan payments.

If you don’t have time to improve your credit scores before applying, adding a qualified cosigner or co-borrower to your application can be a good alternative. Since another person agrees to take responsibility for repayment, the risk to the lender is reduced and you’re more likely to qualify.

Where to find personal loans with bad credit

You can find bad credit loans from various lenders, including the following types of institutions:

• Banks: They often have higher loan maximums, so they can be a good choice if you need to borrow a larger sum. However, they may have stricter income and credit requirements, and may charge higher APRs.
• Credit unions: These nonprofit lending institutions typically offer lower rates and fees than other lenders, and they may have options for borrowers with lower credit scores. The biggest perk of a federal credit union is its rate cap — the NCUA bars these institutions from imposing APRs above 18%, which can help you keep borrowing costs down.
• Online lenders: They’re convenient when you need money quickly; you could receive the loan funds the same day you apply. But rates and fees vary significantly between lenders.

Related >> Credit union vs. bank: Which is best for you?

If you need quick access to cash but your credit scores are low, some personal loan lenders work with borrowers who have bad credit. Some lenders also review alternative credit data — like utility payments and savings account balances — when making lending decisions. If you make your monthly payments on time and in full, you can improve your credit scores and have an easier time qualifying for loans in the future.

On the other hand, lenders with loose eligibility requirements typically charge high interest rates and fees, making the loans expensive to repay and increasing your risk of falling behind on the payments. If you can’t qualify for a loan independently, you may be required to apply with a cosigner (or co-borrower) to secure financing — a stipulation that not every borrower can meet.

Unfortunately, the field of loans for bad credit is littered with predatory lenders looking to take advantage of desperate borrowers. If a lender guarantees you'll qualify regardless of your credit scores or their rates and fees are difficult to locate, it's likely a scam or a predatory loan.v

Types of bad credit loans

Whether you need to consolidate high-interest debt or pay for an unexpected car repair, there are several types of bad credit loans to consider:

Secured personal loan

Best for: Borrowers shopping for the lowest possible rates

Secured personal loans require collateral, such as your car. These loans have less stringent credit requirements, and you may qualify for lower rates than you'd get with an unsecured loan (without a co-borrower). However, if you fall behind on your payments, the lender can sell your collateral to recoup their money.

Unsecured personal loan

Best for: Fair to excellent credit

Eligibility for unsecured personal loans is based on your credit history and income. If you have fair to excellent credit, you can borrow money at competitive rates without providing any property for collateral. But if you have lower credit scores, you may struggle to find a lender willing to work with you, or you may have to accept a much higher APR.

Joint personal loan

Best for: Borrowers with a partner or relative with good credit

A joint personal loan is a loan made to two people. With a joint loan, a relative or partner applies with you, and you share access to the loan funds and the responsibility for repaying the loan. If you have poor credit, applying with someone with good credit improves your chances of getting a loan and qualifying for a better rate. Remember that if you default on the loan, your co-borrower’s credit will be affected, which could damage your relationship.

Buy now, pay later

Best for: Small purchases

Buy now, pay later apps typically allow you to spread out your purchase in four installments repaid over a total of six weeks. BNPL loans may be quick and convenient, but you can quickly rack up debt — and face hefty fees — if you use them too often or don’t repay them on schedule.

Cash advance

Best for: Small amounts of quick cash

If a sudden expense pops up and you need cash — for example, to pay a handyman or repay a friend — you can use your credit card to take out cash and borrow against your credit limit. However, avoid cash advances when possible; they have high APRs and added fees, so they're an expensive form of credit.

Related >> The best loan apps of 2024 for small-amount borrowing

Bad credit loans to avoid

Avoid: Payday loans, title loans and guaranteed loans

Payday loans should be avoided at all costs — they have APRs that can be as high as 400% and typically must be repaid by your next payday, making them very difficult to repay. In fact, 80% of payday loans are rolled over or renewed because borrowers can’t afford to repay them on time, according to Pew Charitable Trusts. Rolling over a payday loan incurs more fees, increasing the cost of borrowing and potentially trapping you in a cycle of debt.

Car title loans come with similarly high fees but with the added risk of losing your car to repossession if you can’t repay the loan as agreed. Any loan that promises “guaranteed approval” or doesn’t require a credit check should be viewed with skepticism and avoided.

How to get a bad credit loan

Applying for a personal loan with bad credit is easier than you may think. While the process can vary by lender, you’ll generally follow these six steps:

1. Check your credit scores

Before shopping for a loan, check your credit. You may be able to view your scores for free through your credit card issuer, bank or other third-party services like Credit Karma. Reviewing your credit scores will help you understand the types of loans you may qualify for and which lenders might be the best fit.

If your credit is poor, you can improve it by paying down existing balances, making all payments on time and minimizing new credit applications.

2. Assess your budget

Before taking out a loan, confirm you can comfortably afford the payments by reviewing your budget. Add up all of your monthly expenses and income; ideally, you'll have some wiggle room to cover both the loan payments and any unexpected expenses.

Taking on unnecessary debt should be avoided, so only take out a loan when you have no other options. If you can’t afford to repay the loan, you risk further damage to your credit and potential collection actions.

3. Pre-qualify with multiple lenders

Once you know how much you can afford each month, you might start shopping for a loan. It's a good idea to check offers from several lenders. Many have pre-qualification tools that allow you to check your loan options without affecting your credit, making it easier to compare lenders.

Use a personal loan calculator, like this one from Calculator.net, to compare loan offers and determine whether the APRs you’re quoted equate to affordable monthly dues.

4. Consider using a cosigner or co-borrower

If you have poor credit, consider asking a relative or close friend to cosign your loan application. When a second person agrees to repayment of the loan, the risk to the lender is reduced. As a result, you’re more likely to be approved and may even qualify for lower rates than you'd get by yourself.

If you plan to use a cosigner or co-borrowers (to apply for a joint loan), check that your lender offers that option. And before asking a loved one to cosign your loan, be sure you can pay the loan as agreed — if you fail to repay the funds, your cosigner or co-borrower’s credit will be impacted, which may negatively affect your relationship.

5. Gather financial documents

When you're ready to apply for a loan, make sure you have the following information and documents on hand to streamline the process:

• Your Social Security number
• Proof of income, like recent pay stubs or W-2s
• Proof of residence, like mortgage statements or a rental agreement
• A copy of your driver's license or other government-issued form of ID
• A list of your current balances and creditors, if you’re consolidating debt
• Your bank account and routing numbers

6. Submit an application

Most lenders allow you to apply for a personal loan online. It can take minutes to apply, and you'll have to consent to a hard credit pull, which can temporarily ding your credit.

Some lenders offer instant loan decisions, while others may take several days to review your application. In some cases, the lender may need more time and additional information to make a decision.

Similarly, the time it takes to disburse loan funds varies by lender and depends on how quickly your bank processes the deposit. You might receive the loan funds as soon as the same day you apply, but almost certainly within a few business days.

7 tips for qualifying for a loan with bad credit

1. Clean up your credit. Before applying for a loan, work on improving your credit scores. Focus on making all debt payments on time and try to pay down revolving forms of credit (like credit cards) as much as possible. Review your credit reports (via AnnualCreditReport.com) and dispute any errors you find with the reporting bureau. A certified credit counselor can also provide strategies for repairing your credit.
2. Shop around. If you use the first lender you find, you could be leaving money on the table. Each lender sets its own interest rates, so you may find a substantially lower rate with one lender over another, even if you have bad credit.
   Avoid multiple hard credit inquiries (which cost you points from your credit scores) by getting pre-qualified with multiple lenders to find the ones most likely to approve you. Keep in mind that pre-qualification offers are just estimates of the rate you’ll receive — the rate may change when you formally apply.
3. Get a secured loan. Loans backed by collateral are easier to qualify for and have lower interest rates than unsecured loans, since the lender can seize your collateral (such as your car or savings account) if you fail to make payments.
4. Apply with a second person. Lenders are looking for reassurance that the money they lend will be repaid. If your credit is weak, adding a cosigner or co-borrower to your loan improves your odds of approval because a second person is responsible for making the payments. But being a cosigner or co-borrower is no small ask — they’ll be obligated to repay the loan if you fail to, and their credit can be negatively affected if you default.
5. Only borrow what you need. Smaller loans are easier to qualify for. If you can come up with some of the funds on your own, perhaps by borrowing from friends or family, and apply for a lower loan amount, you're more likely to be approved.
6. Go to a credit union. Credit unions are nonprofit, member-owned organizations that typically have relaxed eligibility criteria. Federal credit unions must abide by the 18% rate cap set by the NCUA, so if you qualify, you won’t receive the high 36% APR that other lenders charge. Plus, you can find several alternative products at credit unions that are ideal for borrowers with bad credit, like Payday Alternative Loans (PALs) and credit-builder loans.
7. Become an authorized user. If you have a trusted family member with good credit, ask to become an authorized user on their credit card. Their account information will appear on your credit reports, and their positive repayment history will boost your credit scores. But be careful with this strategy — if they miss payments or max out the card, being an authorized user could do more harm than good.

How to compare bad credit loan offers

Don’t blindly accept the first loan offer you receive — shopping around for a loan is critical to finding the best rates and terms. When comparing your options, pay attention to the following variables:

• Review borrowing requirements: Lenders set their own personal loan requirements, such as a minimum credit score (usually 600 or better), maximum debt-to-income (DTI) ratio (up to 43%) and minimum annual income (can be as low as $25,000). Review these prerequisites carefully to ensure you meet them before you apply.
  Check your credit scores before applying to eliminate lenders and save time.
• Consider APRs:Represented as a percentage, the APR captures how much you'll pay in interest and fees in a year. Rates on personal loans typically range from 7% to 36%. Financial experts generally consider APRs below 36% to be affordable (though that’s similar to the rate you’d pay on a credit card) — be wary of lenders offering rates above that threshold.
• Compare repayment terms: While a longer repayment term will result in a smaller monthly payment, you'll pay more in interest over the life of the loan. Personal loan terms typically range between one and seven years.
• Calculate the monthly dues: You’ll be responsible for making that monthly payment in full and on time, so it’s crucial that you can reasonably afford it. After all, the worst mistake you could make is to borrow a loan you can’t keep up with, which would further damage your credit and lead to the debt going to collections.
• Read lender reviews: You can review a lender’s score with the Better Business Bureau (BBB) or read complaints filed through the Consumer Financial Protection Bureau (CFPB).

When comparing loan offers, consider whether the monthly payment fits into your budget and examine the total cost of borrowing. Let’s say you received the following loan offers for a $10,000 loan with a five-year repayment term:

The lowest APR will result in both lower monthly dues and a significantly lower total cost. To save money on your loan, take steps to qualify for the lowest APR possible, like improving your credit scores, using a cosigner or co-borrower and comparing offers.

Common loan fees

Bad credit loans typically come with fees, which add to your overall cost. These are the fees you’re most likely to encounter when borrowing a personal loan:

How to spot bad credit loan scams

Borrowers with poor credit are common targets for fraudsters and predatory lenders. If an offer sounds too good to be true, you’ve probably encountered a scam. When reviewing a loan offer, look for these red flags:

• Guaranteed approval: Lenders take on a substantial amount of risk by lending money, so they tend to review borrowers' information carefully. If a lender offers guaranteed approvals, it’s unlikely that they’re a reputable company.
• Requires payment upfront: Personal loans from reputable lenders may charge origination fees — fees deducted from the loan at disbursal — but they never require upfront payments. Requests for prepaid credit cards in exchange for a loan are a sure sign of a scam.
• Pressure to act immediately: Scammers pressure borrowers to make a decision quickly so you don't have time to research the lender or read the fine print. If a lender pressures you to accept the loan immediately, that's a sign you should walk away.
• Not registered: The Federal Trade Commission (FTC) requires lenders to register in states where they offer loans. If you receive a loan offer from a lender that isn’t licensed to do business in your state (or doesn’t list its state licenses), it's likely not a reputable lender.
• Calls or knocks: The FTC prohibits lenders from offering loans over the phone or through door-to-door sales. Reputable lenders will not contact you directly to solicit your business, though email advertisem*nts are permitted.
• Lack of transparency: Before you sign a loan contract, read the terms carefully. If the lender doesn’t disclose basic loan details like the interest rate or fees, it may be a scam.

If you think you’ve been the victim of fraud, report it to the FTC.

Alternatives to personal loans for bad credit

Bad credit loans are available, but they tend to have higher rates and fees than loans for other borrowers. Before applying for a loan, consider these alternatives instead:

Methodology

Our editors and data researchers sought to be as objective as possible in determining our list of the best lenders for bad credit loans. We designed a rubric to make apples-to-apples comparisons among lenders; collected data from lender websites and independent industry sources; and analyzed the inputs to create an out-of-five-star rating. Here are the five categories of data we collected:

Loan cost (25%)

If you have bad credit scores, the rates on a personal loan can be high. Offering competitive interest rates is critical to consider when assessing lenders. We also asked:

• Does the lender offer a rate discount for signing up for autopay?
• Can a borrower check rates without facing a hard credit pull?

Loan details (20%)

We examined the basics of each lender’s loan offerings, including:

• Funding timeline
• Loan amounts offered
• Secured loan options

Eligibility and loan availability (30%)

For bad-credit borrowers, finding a lender that accepts low credit scores is top of mind. For this category, we also analyzed how accessible each lender is to a wide variety of borrowers. We asked:

• Does the lender allow joint loans or cosigners?
• What is the lender’s minimum annual income requirement?
• Are loans available nationwide?

Repayment (15%)

Here, we assessed the borrower’s repayment terms and options. We prioritized lenders that offer multiple term length options and hardship assistance.

Customer experience (10%)

While getting a loan can be challenging for bad credit borrowers, it’s also important that the experience after disbursem*nt is seamless and positive. For this category, we examined each lender’s customer service options, including methods of communication and mobile app availability. We also leveraged independent organizations — such as the BBB and the CFPB — to better understand lenders’ past behavior toward borrowers.

What didn’t make the cut

We researched and reviewed 32 personal loan lenders before narrowing our list down to the seven best. Many financial institutions didn’t measure up in various categories, often for requiring high credit scores or charging high APRs.

• Citi, Discover, LightStream and SoFi require good credit scores.
• LendingPoint, Rocket Loans and Universal Credit charge high origination fees.
• MoneyKey, Truist Bank, Achieve and U.S. Bank aren’t available in all states.
• BHG Money, Laurel Road and Achieve have high minimum loan amounts.

Additional reporting by Sarah Brady and Devon Delfino

Frequently asked questions (FAQs)